Primis Financial Corp. Q3 FY2025 earnings call

Management Statement and Operational Highlights:

• Profitability: Q3 2025 net earnings were $6.8 million ($0.28 per share) vs $2 million ($0.08 per share) in Q3 2024. ROA was 70 basis points, adjusted ROA near 90 basis points.
• Margin: Core margin 3.15%, net interest margin 3.18% in Q3 2025. New loans booked at yields near 7%, with loans repricing later to increase yields.
• Deposits: Noninterest-bearing checking accounts up 16% year over year; core bank cost of deposits 173 basis points in Q3, with digital rates lowered 35 basis points post-Fed cut in September.
• Segments: Mortgage division production grew from $20M/month to $100-120M/month; Panacea loan balances and deposits increased; mortgage warehouse had strong growth in balances and uncommitted lines.
• Credit: Some loan downgrades and nonaccruals, but properties had improving NOI and leasing activity; working with borrowers to exit relationships through sales or refinance.

Segment Performance:

• Core Bank: Reported net earnings of $6.8 million and $0.28 per share in Q3 2025, compared to $2 million and $0.08 per share in Q3 2024. ROA improved to 70 basis points, and adjusted core ROA was near 90 basis points. Core margin was 3.15%, up from 3.12% in Q2 2025 and 35 basis points higher than year ago. Core bank cost of deposits was 173 basis points in Q3, down 6 basis points quarter over quarter.
• Mortgage: Pretax earnings in Q3 were ~$1.9 million. Mortgage warehouse had average balances of $210 million in Q3, ending at $327 million. Uncommitted lines approved and in place were over $1 billion, with a pipeline of new opportunities at ~$300 million. Pretax earnings for warehouse group were ~$1.6 million, efficiency ratio at 27%.
• Panacea: Loan balances averaged $530 million in Q3 2025 vs $385 million in Q3 2024. Deposits ended at $132 million in Q3 2025, 50% higher than year ago. Cost of deposits for Panacea was 1.37% in Q3 2025, lower than core bank and year ago.

Guidance:

• Target 1% ROA; adjusting for items, Q3 ROA was ~90 basis points, expecting pretax earnings to grow to over $13 million near term.
• Focus on driving down core noninterest expense even with inflation; continuing to replace earning assets and improve deposit mix to reach 3.30% margin by first quarter 2026.
• Aim to have noninterest-bearing deposits closer to 20% of total deposits for the institution.

Risks:

• Credit risks related to certain loans and office real estate properties in Northern Virginia, including nonaccrual loans and weaker guarantor support.
• Potential runoff in mortgage warehouse seasonality during Q4, and competition impact on deposit costs.

Q: Thoughts on loan growth for Q4 and 2026?

A: Dennis and Matt discuss mortgage warehouse potential, with continued growth expected; Panacea loan balances could reach $150 million next year; core bank expected to grow 7%-8% in Q4 and 10%-12% in 2026.

Q: Deposit costs with rate cuts?

A: Dennis and Matt talk about deposit mix, noting digital customers are sticky with retention rates over 90%, and deposit costs remain attractive with lower rates post-Fed cut.

Q: Asset quality and resolution?

A: Dennis discusses resolution timelines for certain loans, with some properties having improving NOI and leasing activity, and potential resolution of a C&I loan in the fourth quarter.